Columbia to Restart Cove Point Imports; LNG on the Rise
The role of liquefied natural gas (LNG) in the U.S. gas supply
mix continues to grow. Last year's third quarter saw a significant
percentage jump in LNG imports, and that trend likely will continue
with LNG import facilities being reopened in Maryland and Georgia.
Last week saw Columbia LNG Corp. go ahead and buy the other half
of the Cove Point LNG Limited Partnership it did not already own
from Potomac Electric Power Co. unregulated subsidiary Potomac
Capital Investment Corp. An affiliate of Columbia LNG Corp. paid
$40.7 million. The sale gives Columbia total ownership of the Cove
Point LNG terminal. Cove Point LNG plans for an open season next
month for bids on import capacity. Pending approval by the Federal
Energy Regulatory Commission, Cove Point plans to reopen its LNG
marine terminal facilities by late 2001.
Located in Lusby, MD, the Cove Point terminal includes LNG
storage and terminal operations, and an 87-mile gas pipeline
that connects with pipelines in northern Virginia. It is able to
send out up to 1 Bcf/d. The Cove Point LNG terminal currently
provides peak shaving services to meet high-demand periods for
customers in the mid-Atlantic and southeastern regions. PCI and
Columbia had owned the facility equally since 1994.
"The completion of this sale will allow PCI to focus its capital
resources on its high-growth telecommunications strategy," said
John D. McCallum, PCI President.
Columbia LNG President Michael Bridges said, "Columbia saw a
good business opportunity here with the LNG import business.
There's clearly a renewed interest in LNG imports into the United
States." He cited recent LNG import activities by Coral Energy and
Enron, among others and said his company has talked to a number of
potential importers who have expressed "strong indications of
interest" in Cove Point with an eye toward serving Mid-Atlantic
"Most companies recognize that Cove Point being up on the East
Coast is a very strategic location."
Meanwhile, Southern LNG Inc. won Department of Energy approval
last week to begin importing up to 82 Bcf/year from Trinidad and
Tabago over 22 years to its currently idle Elba Island, GA,
terminal. Last month FERC gave Sonat preliminary authorization to
recommission the terminal at a cost of $26.2 million after nearly
20 years of inactivity. The plant will have a baseload sendout rate
of 330,000 Mcf/d and a peak-day sendout of 540,000 Mcf/d.
Sonat recently had a successful open season for a revitalization
of the of the mothballed Elba terminal. The winner of all 4 Bcf of
capacity was Sonat Energy Services (see NGI July 5).
The FERC authorization was good news not only for Southern LNG
but also for Atlantic LNG of Trinidad, which owns the liquefaction
plant in Trinidad that would supply LNG to Elba Island. Atlantic
LNG plans to proceed with an expansion of its Trinidad LNG
facility, while an overseas consortium --- known as the NCMA
Developers --- plans to develop offshore gas reserves to be
liquefied by Atlantic LNG and shipped to the Southern LNG terminal
Increased demand for LNG in the United States is being driven by
a number of factors, according to Bridges. Obviously, demand for
gas is growing, for power generation in particular. However, the
LNG picture also is supply driven. "There are gas reserves all
around the world. There are a lot of companies looking for ways to
monetize their reserves and looking for ways to get them to market.
LNG is a very viable way to get natural gas to the marketplace. The
United States is a very attractive market." He cited gas price
transparency in the US that attracts LNG sellers from around the
In the short term, there is excess LNG capacity worldwide,
thanks mainly to the economic downturn in Asia, Bridges said.
As Asian markets start to pick up and new markets for LNG develop
in India and China, some of that will begin to dry up, Bridges
said. Long term, he expects LNG to come to Cove Point from the
Atlantic basin and other areas. Deliveries from the Middle and Far
East likely will be on the spot market. "LNG by its nature isn't
going to dominate a market like pipeline gas might."
According to the U.S. Department of Energy's Office of Natural
Gas & Petroleum Import and Export Activities, total gas imports
grew by 15% in the third quarter of 1999 over the third quarter of
1998 while LNG imports were up a strong 221% over the same period.
During the third quarter of last year, four companies ---
Distrigas; Duke Energy; CMS Marketing; and Coral Energy Resources
--- imported 11 spot LNG cargoes from five different countries:
Algeria, Australia, Malaysia, Qatar, and Trinidad. The imports
totaled 23.7 Bcf. The period marked the first time LNG has been
imported from Malaysia with a cargo brought in by Coral in August.
Under long-term LNG contracts, Distrigas imported 2.5 Bcf from
Algeria at $2.36/MMBtu and 16 Bcf from Trinidad at $2.24/MMBtu.
Duke imported 7.92 Bcf from Algeria at $2.00/MMBtu. And 16.9 Bcf of
LNG was exported to Japan from the United States at $2.90/MMBtu
Under short-term contracts, Distrigas brought in 5.9 Bcf from
Trinidad at $2.12/MMBtu. Duke imported 5.6 Bcf from Algeria at
$2.25/MMBtu. CMS imported 2.3 Bcf from Australia at $2.04/MMBtu and
7.4 Bcf from Qatar at $2.40/MMBtu. Coral brought in 2.6 Bcf from
Malaysia at $2.15/MMBtu.
Looking at the first three months of 1999 and comparing them to
the same period of 1998, the DOE found LNG imports grew by 109%
over the period to 120.9 Bcf from 57.9 Bcf.
Joe Fisher, Houston